Delhi High Court dismisses PIL espousing cause of investors being duped by promoters, alleging arbitrary delisting of securities

delhi high court

Delhi High Court: In a PIL filed by Atul Agarwal (petitioner), who is holding a bachelor’s degree in law seeking relief by espousing the cause of millions of investors who are being duped by the unscrupulous promoters of the companies as the promoters of the companies vanish after siphoning off the hard-earned money of the investors. The petition relates to the shares/ stocks of as many as 464 companies that have been arbitrarily and without any efforts on the part of the Bombay Stock Exchange (respondent 3) have been de-listed. A division bench of Subramonium Prasad, CJ., and Tushar Rao Gedela, J. held that the interest of the investors is certainly protected under the Statutory Provisions governing the field in view of the statutory provisions already in place.

The main grievance of the petitioner is that the Bombay Stock Exchange/ BSE (Respondent 3) is empowered under the statutory provisions to list or to suspend the trading of shares/ stocks/ securities and the listed companies on the stock exchange keeping in view Rule 19(5) of the Securities Contracts (Regulation) Rules, 1957 and the power to suspend the listed company is being arbitrarily used by Respondent 3 being the stock exchange, merely on the grounds of non-compliance of procedural disclosures under a listing agreement, nonpayment of the listing fees etc., and the shares/ stocks/ securities of the listed companies have been suspended from time to time.

Counsel for petitioner submitted that large number of companies have been suspended from continued listing by Respondent 3 and subsequently many of them have been de-listed without ensuring any protection to investors and, therefore, appropriate mechanism should be in place to act against those persons who are duping the investors.

SEBI submitted that the petitioner has filed the present petition without appreciating the fact that the interest of investors has been duly taken care of and protected by SEBI in terms of De-Listing Regulations as well as SCRA and the revocation norms brought by Respondent No.3 BSE, have been done so in furtherance of the provisions of SCRA and the Securities Contract Regulation Rules, 1957 and all efforts are being made by the SEBI as well as BSE to ensure that no fraud is played upon the investors.

The Ministry of Corporate Affairs (respondent 4) submitted that a fund has been created i.e., Investor Education and Protection Fund, and investor awareness programmes are also conducted by MCA. The Court noted that The SEBI has been established under the enactment of Parliament i.e., SEBI Act with the object to protect the interest of investors in the securities and to protect the interest of investors in the securities and to promote the development of, and to regulate the securities market. The Court further noted that the SEBI is empowered to take all such measures in the interest of investors and such measures may include regulating the business in stock exchange, registering and regulating the working of stockbrokers, performing such functions and exercising such powers under the Provisions SCRA, as may be delegated by the Central Government.

Section 21, 21-A, 23 and 30 of the SCRA provide for delisting of the securities and the mechanism to protect the interest of investors. The aggrieved investor can certainly prefer an Appeal before the Securities Appellate Tribunal (SAT) in case he is aggrieved in the matter of delisting of the security. The SEBI in exercise of powers conferred by Section 31 read with Section 21A of the SCRA and Section 30, sub section (1) of Section 11 and sub section (2) of Section 11-A of the SEBI Act, has made regulations known as Securities and Exchange Board of India (Delisting of Equity Shares) Regulation, 2021. Chapter-III and Chapter-IV deal with voluntary delisting and Chapter-V deals with compulsory delisting.

The Court concluded that statutory provisions of law provide for an Appeal against any order/ decision for recognized stock exchange before the SAT and any person aggrieved in the matter by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the SEBI under Section 4B can prefer an Appeal, therefore, an efficacious remedy is also available under the statutory provisions.

Thus, the Court held that a transparent mechanism of delisting the securities, adequate participation and/ or representation of public shareholders in the process of delisting is in place, and a remedy is also available to aggrieved investor in the matter of delisting.

[Atul Agarwal v UOI, 2023 SCC OnLine Del 2914, decided on 19-05-2023]

Advocates who appeared in this case :

Mr. Nikhil Tyagi, Mr. Rakesh Kumar Khare, Advocates for the Petitioner;

Mr. Ravi Prakash, CGSC with Mr. Farman Ali, Ms. Usha Jamval, Advocates for the R-1;

Ms. Manisha Agrawal Narain, CGSC with Mr. Sandeep Singh Somaria, Ms. Rakshita Goyal, Advocates for the UOI;

Mr. Neeraj Malhotra, Senior Advocate with Mr. Ashish Aggarwal, Mr. Nimish Kumar, Mr. Satyajit Yadav, Advocates for the R-2/SEBI;

Ms. Surekha Raman, Mr. Vijay Valasan, Ms. Unnimaya S, Advocates for the R-3/BSE.

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